D.Boerse, NYSE propose remedies to seal mega-deal

By IBT Staff Reporter On 11/18/11 AT 8:08 AM

Exchanges Deutsche Boerse AG and NYSE Euronext will sell some businesses and give rivals access to a major derivatives clearing house in concessions aimed at winning support from antitrust regulators for their $9 billion merger.

People working directly on the deal told Reuters the exchange operators submitted the plan to the European Commission late on Thursday, the deadline for the companies to make proposals to address concerns over their combined grip on derivatives trading.

In a statement on Friday, the companies confirmed plans to sell off significantly overlapping parts of their single-stock equity derivatives businesses in key markets including France, Belgium, Germany, the Netherlands, and the UK.

The other main concession would allow rival exchanges to clear interest-rate and equity-index derivatives on Deutsche Boerse's clearing house, Eurex Clearing, as long as the products were new and innovative.

That means rivals such as London Stock Exchange Group Plc or Chicago-based CME Group Inc would not be able to clear existing, or even new copycat products, under the plan.

Deutsche Boerse and NYSE Euronext continue to believe that the transaction will have no detrimental effect on competition, the exchanges said in the statement.

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The Deutsche Boerse-NYSE Euronext tie-up was announced amid a flurry of cross-border merger attempts earlier this year by exchanges eager to cut costs and diversify in the face of fast-eroding market share in their traditional stock-trading businesses.

It was the biggest of the planned mega-deals, and the lone survivor after others fell apart. It will create the world's largest exchange operator if it receives approval.

Deutsche Boerse shares rose on the news, up 1.5 pct by 1015 GMT, recovering from a 2.2 percent drop, while NYSE Euronext shares won 0.1 percent in very thin Paris trading .

The STOXX Europe 600 Financial Services was flat.

I think this is a good way for Deutsche Boerse and NYSE to make concessions which address the Commission's issues without giving up too much, said analyst Christian Muschick at Silvia Quandt Research.

Deutsche Boerse and NYSE face an in-depth antitrust review of the deal. Given the concessions, the new deadline for the EU to decide on the deal is January 23, from December 22 previously.

The pair argues that together they would create a European champion that could better compete with strong exchange competitors in the United States, Latin America and Asia.

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